How to determine profitability

Even so, you can still use these calculators by thinking clearly about the costs involved. Profitability calculators (for example, The Genesis Block) often ask for your electricity costs, and sometimes the initial investment in hardware. Effectively, you are being asked for your ongoing costs and your one-off investments.

Therefore, since the provider, not you, is paying the electricity bills, you can enter the monthly mining bill in place of the electricity cost.

The conversion process isn't completely straightforward, though. In the case of hardware miners, you can work out the monthly running cost by multiplying your electricity charge (ie: $ per KWh) by the power consumption of the unit and by a conversion factor of 0.744 (the ratio of seconds per month to joules of energy per KWh).

But, for cloud mining calculations, you need to do the opposite, because the provider gives you an (effective) monthly running cost. Hence, you need to calculate an equivalent cost per kilowatt hour to feed into the mining calculator. This is done by dividing (not multiplying) the monthly running cost by the 0.744 conversion factor mentioned above.

Risk vs reward

When engaging in any type of cryptocurrency mining there are risks, but profitability is possible if you make the right choices. In this article, we've given you some pointers on how to decide which way to go.

In your test calculations, you will likely see that some cloud mining services will be profitable for a few months, but, as the difficulty level of bitcoin increases, you would probably start to make a loss in four to six months and beyond.

A possible remedy to this situation is to reinvest what you have made into maintaining a competitive hashing rate, but this is highly speculative.

As mentioned above, the risk of fraud and mismanagement is all too common in the cloud mining space. Investors should only invest in cloud mining if they are comfortable with these risks - as the saying goes, never invest more than you are willing to lose.

Investigate social media channels, speak with former customers and ask pointed questions of operators prior to investing. Ultimately, you should practice the same kind of due diligence that you would for any investment.

Disclaimer: This article should not be viewed as an endorsement of any of the services mentioned. Please do your own research before considering investing any funds via these services.